Every New Year, resolutions are made, and many come to an end. This year, there’s one simple resolution you can act on now and thank yourself for later: Better financial organization.
Getting organized isn’t just about creating a budget, though. To get your personal financial life in order, start with these three important steps.
Step 1: Get Everything Physically (and Digitally) Arranged
Organize your important financial information in one physical location – and in today’s world – one secure digital location. This includes:
Digital: Gather all account information, login credentials and passwords in a secure place. With so much personal management happening online, password organization tools help maintain a master list of account access data while also securing sensitive information. This practice also prevents having to reset your password every time you login to an account.
Physical: Collect important financial documents to safekeep at home – specifically tax documents like W-2s and Form 1099s, and other items like Social Security cards, insurance documents, financial statements, mortgage statements, car contracts, etc. Consider creating digital copies for backup and easy access any time via digital devices.
Step 2: Make Sure All Financial Records are Updated
Keeping financial records current is simply good financial “hygiene.” First, review your insurance, retirement and brokerage accounts, ensuring that your beneficiaries still reflect your personal wishes and match estate planning documents.
Next, if you participate in a workplace retirement plan, update your monthly contribution amount, especially if you received a year-end bonus or raise. Always try to maximize your annual contribution, contributing at least enough to receive any employer match. You should also review your investment portfolio at least annually to ensure your holdings align with your long-term goals and contact your advisor about potential adjustments.
Lastly, make sure you have adequate health and life insurance coverage. Big life events from last year may require that you seek additional insurance.
Step 3: Review Your Financial Plan – or Create One
You’ve put the time into organizing your finances, now use the information to work toward your goals. If you don’t have a financial plan yet, follow these steps to get started or consult your financial advisor:
First, understand your annual budget. Factor in retirement savings, money for vacations and obvious items like rent, mortgage, medical, food and car expenses.
Next, identify your financial aspirations, like creating an emergency reserve, saving for retirement, buying a home or funding education. This plan will be the roadmap toward achieving your goals.
Finally, optimize the plan by reviewing last year’s financial practices, then ditching any habits that will prevent you from reaching your long-term goals. Create a strategy and regularly revisit it to evaluate progress.
New Year, New Commitment to Your Finances
Resolutions are unsuccessful if we don’t set the right framework for achievement, so get your financial house in order early in the year to increase your chance of success as normal routines and pre-Covid temptations resume. As always, your trusted financial advisor can help create a framework for your success as the year unfolds.
